SentinelOne Impresses Analysts With Q4 Beat; Flag Conservative Guidance

Needham analyst Alex Henderson reiterates SentinelOne Inc S with a Buy and a $19 price target.

Sentinel posted strong Q4 results, with revenue up 92% Y/Y to $126.1 million, while ARR grew 88% Y/Y to $548.7 million, both above consensus.

Guidance was mixed with Q1 revenue ahead of the Street, while full-year revenue, operating margin, and ARR missed expectations. 

FY24 Revenue guidance for 50.5% growth at the midpoint to $635.5 million came in below consensus, while ARR growth of 47% was a downtick from prior guidance for 50% plus. 

At the same time as they offered conservative guidance, Sentinel noted no deterioration from Q3 to Q4, more robust win rates, a pipeline that has doubled Y/Y to record levels, a slight uptick in Gross Customer Retention, and strong customer Net Retention >130%. 

SentinelOne still believes 50%+ ARR growth is achievable.

Guggenheim analyst Raymond McDonough reiterates SentinelOne with a Buy and a $18 price target.

Going into SentinelOne's Q4, the analyst saw little risk, and Q1 consensus estimates given implied New Business declines similar to that of Q3 (down approximately 65%), where rumblings of execution issues surfaced and the soft macro environment began to impact most, if not all, of security. 

While 4Q did not prove to be a significant improvement to 3Q, there were enough improvements for revenue and ARR to beat Street expectations. 

The analyst reserved concerns over preliminary FY24 ARR guidance of at least 50% Y/Y growth, as he believed it implied an outsized rebound in New Business growth in F2H24. 

Despite a pipeline that has almost doubled Y/Y, win rates and gross retention improving sequentially, and cloud workload protection gaining momentum, management lowered FY24 ARR growth expectations to 47% Y/Y. 

FY24 revenue guidance also came in 170bps below Street expectations, with management underscoring multiple times that guidance was prudently considering a persistent challenging macro environment. 

Ultimately, the analyst views FY24 guidance as reasonable with more potential upside to revenue than ARR, but it all comes down to execution. 

JMP Securities analyst Trevor Walsh maintains SentinelOne with a Market Outperform, lowering the price target from $36 to $26.

The re-rating reflects multiple compression across JMP's peer group and a more conservative top-line outlook due to macroeconomic uncertainty heading into FY24 after the company reported 4Q results, marking the sixth consecutive quarter of over 25% Y/Y operating margin expansion, and further outlined a critical partnership with cloud security startup Wiz, all leading the stock to trade up ~5% during the after-hours session.

Price Action: S shares traded higher by 8.85% at $15.75 on the last check Wednesday.